Payment by social results

14 Apr 14

Early intervention to tackle social problems is more vital than ever in a climate of local authority cutbacks. Payment-by-results Social Investment Bonds are potentially an important way to kick-start such intervention

Social Impact Bonds have had a significant amount of attention in recent years. Some claim that in them all our prayers have been answered, while others adopt a sceptical view. The lure of getting external investment for a service that may not have otherwise been funded seems pretty tempting.

At the Early Intervention Foundation we want to see a shift in spending from late, reactive and crisis-led approaches to preventative early intervention. Early intervention represents an intelligent approach to spending. It requires small investments on targeted interventions to deal with root causes and prevent poor outcomes, rather than the much greater costs of waiting and dealing with the after-effects.

We focus on improving children’s mental health, their ability to form good relationships, communicate, and manage their own behaviour. It is about acting in a less intrusive, more cost-effective way – through well-evidenced interventions - earlier on to prevent high cost interventions; such as a young person being taken into prison, further down the line.

Although the logic is difficult to dispute, the current context is a tough one for such an approach. Increasingly, shrinking local authority budgets are being diverted to high end, crisis funding, with limited spending going on, for example, child protection and children going into care.

In that context, where demand is ever increasing, even investing in the well-evidenced Family Nurse Partnership – a targeted home visiting support programme for first time teenage mothers, where a specially trained family nurse visits the young mum regularly from early in pregnancy until the child is two - can be a tough sell. Long term thinking can easily slip down the agenda when you’re firefighting.

It would seem the promise of social finance, and Social Impact Bonds in particular, has therefore struck a chord at just the right time. It is an attractive new source of finance for services that might not have otherwise been provided, enabling us to reach more children and families than previously possible. Combine this with a transfer of risk away from local authorities to private investors, who both stump up the initial sums and are paid only on success, and they would seem almost too good to be true.

In fact Social Impact Bonds, somewhat inevitably for a new model, have taken a while to get off the ground. While the UK leads the field, so far only 15 SIBs are currently active here out of a worldwide total of just 22. It is also still early days – the SIBs are not yet mature enough to fully demonstrate their achievements. All but one of the 22 are funding interventions at a relatively late stage in the onset of problems, where outcomes (and often associated savings) can be captured fairly quickly.

The Peterborough SIB, the first in the UK, is one example - launched by Social Finance Ltd and issued by the Ministry of Justice, it aims to reduce re-offending by providing intensive support to short-term male prisoners. Success is deemed to be a 10% reduction in re-conviction rates compared to similar prisoners and an interim pay-out to the investor was possible after just 4 years.

The benefits of early intervention can take a decade or more to occur fully; meanwhile, we are interested in working out how SIBs can work for earlier interventions. It can be difficult to attribute the sorts of future outcomes we expect from many early intervention programmes – young adults staying out of the criminal justice system or avoiding NEET status – to one particular programme a child or parent may have received a decade before. Careful evaluation is crucial, and we hope our tools and resources will help.

Early intervention has the potential to change the trajectory of a person’s life at an early stage, unlocking significant cost savings and/or increased revenue for society in the long run. As such it seems an area that is ripe for SIBs. 80% of crime can be attributable to people who had conduct problems in childhood and adolescence, for example. A group parenting programme (aimed at tackling conduct problems) can cost £600 per child, compared with the £75,000 estimated price tag attached to a lifetime of conduct problems. This is the sort of action we can take earlier, compared with leaving problems to become entrenched and manifest themselves in various ways throughout a lifetime.

The only early intervention SIB to date has taken place in Utah. Having had previous success in reducing the need for special education for children by having them participate in a high quality pre-school programme which better prepares them for starting school, Utah used a SIB to expand the programme. Goldman Sachs formed a partnership to fund the expansion, creating the first SIB for early childhood education. Targeting 600 low income children a year, success will be measured on how many of those children do not require future special education.

Despite obstacles, it does seem the SIB train is gathering steam. The government is investing in support - the Social Outcomes Fund, a £20m fund managed by the Cabinet Office is aimed at 'dealing with the main problems holding up the growth of social impact bonds', including the difficulty of aggregating savings which accumulate across many public sector spending ‘silos’ in both central and local government.

‘Top up’ payments to pay for social outcomes that aren’t related to large enough financial savings for any single agency are also being considered as an added incentive. And as the field grows, the time and cost involved in developing a SIB is coming down, with technical capacity and expertise developing all the time.

We believe that SIBs may have a huge amount to offer to help achieve our goal of shifting the culture from late to early intervention. We’ll be working with our Pioneering Early Intervention Places, and experts in the field to see where we can bring to bear our work assessing evidence, advising on good practice and advocating for change, to help explore these opportunities and make SIBs work for early intervention.

Further examples of SIBs are detailed in the foundation's report

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